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John is a Minnesotan arable farmer with 60 hectares of land. His main crop is consumption potatoes. His total assets are worth $3,600.000, and he has a loan outstanding of $750,000 over which he pays 6% interest. Their return on assets for this year was $150,000 and he had to pay $21,000 in taxes. Their family consumption rate is 30%. Assets = $3,600,000 Liabilities = $750,000 Equity = 3,600.000 - 750,000 = $2,850,000 Interest rate = 6% Interest = $45,000 ROA = $150,000 Taxes = $21,000 Consumption rate = 30% John knows that there is some variability in the total production. This causes his return on assets (ROA) to vary. In 10% of the years, his return on assets is $120,000, in 50% of the years it is $150,000 and the rest of the time the return on assets is $200,000. 5. How would you call this type of variation on return on assets? What other sources of variation cause ROA to vary? 6. Determine John's growth of equity under risk. Probability 0.1 0.5 0.4 ROA $120,000 $150,000 $200,000 ROA (%) 3.33% 4.17% 5.56% 7. Determine the standard deviation and coefficient of variation under risk of the growth of equity. John is a Minnesotan arable farmer with 60 hectares of land. His main crop is consumption potatoes. His total assets are worth $3,600.000, and he has a loan outstanding of $750,000 over which he pays 6% interest. Their return on assets for this year was $150,000 and he had to pay $21,000 in taxes. Their family consumption rate is 30%. Assets = $3,600,000 Liabilities = $750,000 Equity = 3,600.000 - 750,000 = $2,850,000 Interest rate = 6% Interest = $45,000 ROA = $150,000 Taxes = $21,000 Consumption rate = 30% John knows that there is some variability in the total production. This causes his return on assets (ROA) to vary. In 10% of the years, his return on assets is $120,000, in 50% of the years it is $150,000 and the rest of the time the return on assets is $200,000. 5. How would you call this type of variation on return on assets? What other sources of variation cause ROA to vary? 6. Determine John's growth of equity under risk. Probability 0.1 0.5 0.4 ROA $120,000 $150,000 $200,000 ROA (%) 3.33% 4.17% 5.56% 7. Determine the standard deviation and coefficient of variation under risk of the growth of equity

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